Results for the period ended 30 September 2020

 

 

	Financial period from 1 April 2019 to 30 September 2020	Financial year ended 31 March 2019
	US$	US$
Operating activities
Loss before income tax	(8,745,852)	(2,566,894)
Adjustments for:
Interest income	(16,228)	(2,099)
Interest on lease liabilities	422,228	-
Interest on loan from former immediate holding company	218,207	-
Gain on liquidation of a subsidiary	-	(1,663)
Share-based compensation	291,169	138,675
Bad debts written off	-	28,657
Impairment loss on trade and other receivables	3,395,740	-
Impairment loss on intangible assets	30,000	-
Loss on disposal of plant and equipment	-	1,015
Lease concession	(237,130)	-
Plant and equipment written off	60,012	19,801
Depreciation of plant and equipment	374,451	61,484
Amortisation expense	1,130,789	128,229
Unrealised exchange difference	(17,768)	-
Operating cash flows before working capital changes	(3,094,382)	(2,192,795)
Working capital changes:
Trade and other receivables	(538,478)	(344,546)
Deferred revenue	6,436	184,525
Inventories	(33,498)	-
Trade and other payables	5,277	139,077
Cash used in operations	(3,654,645)	(2,213,739)
Interest received	90	2,099
Income tax paid	(830)	(51,512)
Net cash used in operating activities	(3,655,385)	(2,263,152)
Investing activities
Purchase of plant and equipment	(564,934)	(480,279)
Purchase of intangible assets	(44,198)	(90,000)
Advances to related parties	(974,447)	(770,811)
Advances to third parties	112,282	29,112
Acquisition of subsidiaries, net of cash acquired	262,316	(1,937,040)
Purchase of financial asset, at FVOCI	(460,174)	(150,000)
Net cash used in investing activities	(1,669,155)	(3,399,018)

 

  

 

 

 

	Financial period from 1 April 2019 to 30 September 2020	Financial year ended 31 March 2019
	US$	US$
Financing activities
Acquisition of equity interest from non-controlling interests	-	(80)
Proceeds from subscription of shares by non-controlling interests	-	300
Proceeds from issuance of ordinary shares	6,385,000	3,070,000
Loan from former immediate holding company	3,000,000	-
Repayment of lease liabilities	(519,098)	-
Interest paid on lease liabilities	(422,228)	-
Net cash generated from financing activities	8,443,674	3,070,220
Net changes in cash and cash equivalents	3,119,134	(2,591,950)
Effect of exchange rate changes on cash and cash equivalents	44,432	-
Cash and cash equivalents at beginning of period/year	777,847	3,369,797
Cash and cash equivalents at end of period/year	3,941,413	777,847

 

 

 

General

 

Myanmar Strategic Holdings Limited (the "Company") (Registration Number 201302159D) is a public company limited by shares incorporated and domiciled in Singapore with its principal place of business and registered office at 80 Raffles Place #32-01, UOB Plaza, Singapore 048624. The Company was listed on the Main Market of London Stock Exchange on 22 August 2017.

 

The financial information set out in this document does not constitute the Group's statutory accounts for the period ended 30 September 2020 or the year ended 31 March 2019.

 

Statutory accounts for the year ended 31 March 2019 have been filed with the Singapore Registrar of Companies and those for the period ended 30 September 2020 will be delivered to the Registrar in due course; both have been reported on by independent auditors. The independent auditors' report for the period ended 30 September 2020 and the year ended 31 March 2019 is unmodified.

 

The principal activities of the Company are investments and trading in Myanmar and Vietnam related projects. The principal activities of the subsidiaries are set out in the financial statements.

 

Until 29 September 2020, the Company's immediate and ultimate holding company is Macan Pte. Ltd. ("Macan"), a company incorporated and domiciled in Singapore. Related companies in these financial statements refer to the members of the Macan Group. On 30 September 2020, Macan ceased to administer the voting rights over the 151,500 ordinary shares held in the name of an individual shareholder. Accordingly, Macan has lost control over the Company and is now a corporate shareholder of the Company and former immediate and ultimate holding company.

 

The Company's subsidiaries in Myanmar changed their financial year end from 31 March to 30 September to be in line with the directives issued by the Myanmar Internal Revenue Department that all companies incorporated in Myanmar must change their financial year end to 30 September. As the Group has significant operations in Myanmar, the Company had changed its financial year end from 31 March to 30 September to be aligned with its subsidiaries in Myanmar.

 

The current financial period of the Group's financial statements covers a period of 18 months from 1 April 2019 to 30 September 2020 while the comparative financial year ended 31 March 2019 covers a period of 12 months from 1 April 2018 to 31 March 2019. As a result, the amounts presented in the financial statements are not entirely comparable.

 

Significant accounting policies

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and are prepared under the historical cost convention, except as disclosed in the accounting policies below.

 

The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group are presented in United States dollar ("US$") which is the functional currency and the presentation currency for the consolidated financial statements.

 

The preparation of financial statements in compliance with IFRS requires management to make judgements, estimates and assumptions that affect the Group's application of accounting policies and reported amounts of assets, liabilities, revenue and expenses.  Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from those estimates. The areas where such judgements or estimates have significant effect on the financial statements are disclosed in the financial statements.

 

Coronavirus ("Covid-19") Impact

 

On 30 January 2020, the World Health Organisation ("WHO") declared the outbreak a Public Health Emergency of International Concern and was subsequently characterised as a pandemic on 11 March 2020. In response to the pandemic, governments from different countries around the world have implemented containment measures to varying degrees in a bid to curb the spread of the virus. As a result, there has been disruption to global trade due to restrictions for cross-border movement and reduced demand in discretionary activities.

 

The Covid-19 pandemic has affected almost all countries of the world, and resulted in border closures, production stoppages, workplace closures, movements controls and other measures imposed by the various governments. The Group's significant operations are in Myanmar, Vietnam and Singapore all of which have been affected, by the spread of Covid-19 in 2020.

 

Set out below is the impact of Covid-19 on the Group's financial performance reflected in this set of financial statements for the financial period ended from 1 April 2019 to 30 September 2020.

 

·     In 2020, border closures, production stoppages and workplace closures resulted in periods where the Group's operations were temporarily suspended to adhere to the movement control measures imposed by the governments of Myanmar and Vietnam. These negatively impacted business operations in 2020, resulting in a negative impact on the Group's financial performance.

 

·    The Group has considered the market conditions including the impact of Covid-19 as at the reporting date, in making estimates and judgements on the recoverability of the assets as at 30 September 2020. The significant estimates and judgements applied are disclosed in the financial statements.

 

The recovery of the Group's operations and results is highly dependent on the containment of the Covid-19 locally and internationally and the timing of the availability of the vaccine. The diversification of the Group's operations between Myanmar and Vietnam should help mitigate the overall Covid-19 exposure of the Group.

 

As the global Covid-19 situation remains very fluid as at the date of issuance of these financial statements, the Group cannot reasonably ascertain the full extent of the probable impact of the Covid-19 disruptions on its operating and financial performance for the financial year ending 30 September 2021.

 

Going concern assumption 

 

The Group recorded a net loss and net cash used in operating activities of US$8,707,159 and US$3,655,385, respectively for the financial period ended 1 April 2019 to 30 September 2020. The Group's net current liabilities were US$2,853,929.

The Board of Directors of the Company have carried out a detailed review of the 12 months cash flow forecast from the date of approval of the audited financial statements for the financial period ended from 1 April 2019 to 30 September 2020 of the Group.

 

The 12 months cash flow forecast was prepared based on a multiple scenarios with consideration of the continuous effects of Covid-19, Myanmar's state of emergency impact as detailed in the financial statements and other available information about the future. Given the high level of uncertainty that these events creates, the Group conducted extensive stress-testing on the various possible impacts on the financial performance and cash flows of the Group and the length of time it will take for operational activities to recover from these effects according to business segments and countries the Group operates. One of the critical analysis applied is the worst case scenario of prolonged impact on certain business segments on the Group's operations in Myanmar including temporary cessation of business operations for the period under review.

 

The Directors have evaluated that there are sufficient mitigating actions within their control, such as significant reduction of operational activities of non-profitable business segments and reduction of discretionary expenditures to manage operational cost. The Directors of the Company are also satisfied that there are adequate credit facilities, including the drawing of existing unutilised credit facilities to fund its operations.

 

The former immediate holding company has undertaken not to demand repayment of the loan within the next 12 months from the date of approval of the financial statements for the financial period ended from 1 April 2019 to 30 September 2020.The Directors of the Company are of the opinion that no material uncertainty exists and the going concern basis is appropriate in the preparation of the financial statements.

 

Changes in accounting policies

New standards, amendments and interpretations effective from 1 April 2019

 

The standards, amendments to standards, and interpretations that will for the first time by the Group do not impact the Group as they are either not relevant to the Group's business activities or require accounting which is consistent with the Group's current accounting policies, except as detailed below.

 

IFRS 16 Leases

 

IFRS 16 supersedes IAS 17 Leases and IFRIC 4 Determining whether an Arrangement Contains a Lease. IFRS 16 provides a single lessee accounting model which eliminates the distinction between operating and finance leases for lessees. IFRS 16 requires lessee to capitalise all leases on the consolidated statement of financial position by recognising a 'right-of-use' asset and a corresponding lease liability for the present value of the obligation to make lease payments, except for certain short-term leases and leases of low-value assets. Subsequently, the right-of-use assets will be amortised and the lease liabilities will be measured at amortised cost.

 

The Group applied IFRS 16 using the modified retrospective approach with the cumulative effect of initially applying this standard and adjustment to the opening accumulated losses as at 1 April 2019 (the "date of initial application"). The Group elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 April 2019.

 

In applying the modified retrospective approach, the Group has taken advantage of the following practical expedients:

 

·    Leases with a remaining term of twelve months from the date of initial application have been accounted for as short-term leases (i.e. not recognised on consolidated statement of financial position) even though the initial term of the leases from lease commencement date may have been more than twelve months; and

 

·    For the purpose of measuring the right-of-use asset, hindsight has been used. Therefore, it has been measured based on prevailing estimates at the date of initial application and not retrospectively by making estimates and judgements (such as lease terms) based on circumstances on or after the lease commencement date.

 

As a lessee, the Group previously classified leases as finance or operating lease based on its assessment of whether the lease transferred substantially all the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. For those low-value assets based on the value of the underlying asset when new and leases with a lease term of 12 months or less, the Group has elected not to recognise right-of-use assets and lease liabilities for these leases.

 

On adoption of IFRS 16, the Group recognised right-of-use assets and lease liabilities in relation to lease of international school building which had previously been classified as operating leases.

 

Lease liabilities from operating leases under the principles of IAS 17 were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 April 2019. The incremental borrowing rate applied to lease liabilities on 1 April 2019 was 6%.

 

The right-of-use assets were measured as follows:

 

(a)   Properties: right-of-use assets are measured had IFRS 16 applied on commencement of the lease except that it is discounted using the lessee's incremental borrowing rate as at 1 April 2019, adjusted by the amount of any prepaid or accrued lease payments.

 

(b)   All other leases: the carrying amount is determined as if IFRS 16 being applied from the commencement date of the leases, subject to the practical expedients listed above.

 

The effect of adopting IFRS 16 as at 1 April 2019 was as follows:

 

	Increase/(decrease)
	US$
Assets
Right-of-use assets	3,651,192
Prepayment	(120,000)
Liabilities
Lease liabilities	3,504,812
Equity
Accumulated losses	26,380

 

The aggregate lease liabilities recognised in the consolidated statement of financial position as at 1 April 2019 and the Group's operating lease commitment as at 31 March 2019 can be reconciled as follows:

 

	US$
Operating lease commitment as at 31 March 2019	720,000
Add: Effect of extension options reasonably certain to be exercised	3,840,000
	4,560,000
Effect of discounting using the incremental borrowing rate as at date of initial application	(1,055,188)
Lease liabilities as at 1 April 2019	3,504,812

 

Amendment to IFRS 16 Leases: Covid-19-Related Rent Concessions

 

On 9 October 2020, the EU adopted the amendments to IFRS 16 Covid-19 rent concessions to take effect from 1 June 2020, the Group has adopted these amendments early. The amendment provides a practical expedient for lessees accounting for rent concessions that arise as a direct consequence of the Covid-19 pandemic and satisfy the following criteria:

 

(a)     The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

(b)     The reduction is lease payments affects only payments originally due on or before 30 June 2021; and

(c)     There are is no substantive change to other terms and conditions of the lease.

 

Rent concessions that satisfy these criteria may be accounted for in accordance with the practical expedient, which means the lessee does not need to assess whether the rent concession meets the definition of a lease modification.

 

The Group has elected to apply the practical expedient for all rent concessions that meet the criteria. The practical expedient has been applied retrospectively, meaning it has been applied to all rent concessions that satisfy the criteria, which in the case of the Group, occurred from the Vietnam subsidiary. The impact of rent concession is netted off against rental expenses amounted to US$237,130.

 

IFRSs issued but not yet effective

 

At the date of authorisation of these financial statements, the following IFRSs were issued but not yet effective and have not been early adopted in these financial statements:

		Effective date (annual periods beginning on or after)
IAS 1 and IAS 8     (Amendments)	: Definition of Material	1 January 2020
IAS 1 (Amendments)	: Classification of Liabilities as Current or Non-current	1 January 2023
IFRS 3 (Amendments)	: Definition of a Business	1 January 2020
IFRS 3 (Amendments)	: Reference to the Conceptual Framework	1 January 2022
IFRS 4 (Amendments)	: Extension of the Temporary Exemption from Applying IFRS 9	1 January 2023
IFRS 9, IAS 39 and IFRS 7 (Amendments)	: Interest Rate Benchmark Reform	1 January 2020
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (Amendments)	: Interest Rate Benchmark Reform - Phase 2	1 January 2021
IFRS 17	: Insurance Contracts	1 January 2023
IFRS 17 (Amendments)	: Various amendments	1 January 2023
IAS 16 (Amendments)	: Property, Plant and Equipment - Proceeds before Intended Use	1 January 2022
IFRS 10 and IAS 28 (Amendments)	: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	To be determined
IAS 37 (Amendments)	: Onerous Contracts - Cost of Fulfilling a Contract	1 January 2022
Various amendments	: References to the Conceptual Framework in IFRS Standards	1 January 2020
Various amendments	: Annual improvements to IFRSs 2018-2020	1 January 2022

 

Consequential amendments were also made to various standards as a result of these new or revised standards.

 

The Group expect that the adoption of the above IFRSs, if applicable, will have no material impact on the financial statements in the period of initial application.

 

Basis of consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Subsidiaries are entities over which the Group has control. The Group controls an investee if the Group has power over the investee, exposure to variable returns from its involvement with the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

Subsidiaries are consolidated from the date on which control commences until the date on which control ceases. Control is reassessed whenever the facts and circumstances indicate that they may be a change in the elements of control.

 

All intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides an impairment indicator of the transferred asset.

 

The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company, using consistent accounting policies. Where necessary, accounting policies of subsidiaries are changed to ensure consistency with the policies adopted by the Group.

 

Non-controlling interests

 

Non-controlling interests in subsidiaries relate to the equity in subsidiaries which is not attributable directly or indirectly to the owners of the parent. They are shown separately in the consolidated statements of comprehensive income, financial position and changes in equity.

 

Non-controlling interests in the acquiree that are a present ownership interest and entitle its holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value, of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners). The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.

 

When the Group loses control of a subsidiary, it derecognises the assets and liabilities of the subsidiary and any non-controlling interest. The profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. 

 

The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments, or when applicable, the cost on initial recognition of an investment in an associate or join venture".

 

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The consideration transferred for the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Consideration transferred also includes any contingent consideration measured at the fair value at the acquisition date. Subsequent changes in fair value of contingent consideration which is deemed to be an asset or liability, will be recognised in profit or loss. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date.

 

Where a business combination is achieved in stages, the Group's previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

 

Goodwill arising on acquisition is recognised as an asset at the acquisition date and initially measured at the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest (if any) in the entity over net acquisition-date fair value amounts of the identifiable assets acquired and the liabilities and contingent liabilities assumed.

 

If, after reassessment, the net fair value of the acquiree's identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase.

 

Revenue recognition

 

Revenue is recognised when a performance obligation is satisfied. Revenue is measured based on consideration of which the Group expects to be entitled in exchange for transferring promised good or services to a customer, excluding amounts collected on behalf of third parties (i.e. sales related taxes). The consideration promised in the contracts with customers are derived from fixed price contracts.

 

Contract liabilities are deferred revenue comprising management fees, students' fees, new centre fee and other advance consideration received from customers and a related party. Deferred revenue is recognised as revenue when performance obligations under its contracts are satisfied.

 

Rendering of services

 

The Group provides security guarding, risk management and security training services to the customer over a specified contract period. The performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits of the Group's performance in providing the security services. As the Group's efforts or inputs are expended throughout the performance period, revenue is recognised on a straight-line basis over the specified contract period.   

 

For certain contracts where the Group supplies security equipment and provides ad-hoc services such as journey management, revenue is recognised at point in time when goods and services are delivered.

 

Technical support service fees

 

Technical support service fees earned from hostels and language centres managed by the Group are recognised over time on a straight-line basis and when services are rendered with reference to the terms of the contracts.

 

Management fees

 

Management fees earned from hostels, engineering college and language centres managed by the Group, under long-term contracts with the owners, are recognised over time on a straight-line basis as and when services are rendered with reference to the terms of the contracts. The fees are incentive fees, which are based on the profitability of these business operations and the amount of course modules to be delivered.

 

Royalty income

 

Royalty income is recognised over time on an accrual basis with reference to the terms of the "Wall Street English" Centre Franchise Agreement. Royalty is determined based on the agreed royalty rate and the annual total gross revenue of the managed language centres in Myanmar.  

 

New centre fee

 

New centre fee for the opening of new "Wall Street English" language centre in Myanmar is recognised over the exclusive rights to develop and operate for a period of 10 years, the revenue of which is recognised on a straight-line basis.

 

Student fees

 

Student fees include the tuition fees and ancillary fees earned from the provision of Wall Street English language training in Vietnam and kindergarten to primary school education in Myanmar. Tuition fees are recognised over the duration of the course and when services are rendered with reference to the terms of the contract on a straight-line basis over the term of the courses. Ancillary fees are recognised at point in time when goods are delivered and over time on a straight-line basis, respectively according to the delivery of the performance obligations.

Employee benefits

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund and Myanmar Social Security Benefit, are dealt with as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

Employee leave entitlements

 

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated undiscounted liability for annual leave expected to be settled wholly within 12 months from the reporting date as a result of services rendered by employees up to the end of the financial period.

 

Share-based payments

 

The Group issues equity-settled share-based payments to certain employees.

 

Equity-settled share-based payments are measured at fair value of the equity instruments (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period with a corresponding credit to the share-based payment reserve, based on the Group's estimate of the number of equity instruments that will eventually vest and adjusted for the effect of non-market-based vesting conditions. At the end of each financial period, the Group revises the estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period with a corresponding adjustment to the share-based payment reserve.

 

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

Taxes 

 

Income tax expense comprise current tax expense and deferred tax expense.

 

Current income tax

 

Current income tax expense is the amount of income tax payable in respect of the taxable profit for a period. Current income tax liabilities for the current and prior periods shall be measured at the amount expected to be paid to the taxation authorities, using the tax rates and tax laws in the countries where the Group operates, that have been enacted or substantively enacted by the end of the reporting period. Management evaluates its income tax provisions on periodical basis.

 

Current income tax expenses are recognised in profit or loss, except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

 

Deferred tax

 

Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases of asset and liabilities, except when the temporary difference arises from the initial recognition of goodwill or other assets and liabilities that is not a business combination and affects neither the accounting profit nor taxable profit.

 

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the timing of reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the temporary difference can be utilised.

 

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised.

 

Deferred tax assets and liabilities are measured using the tax rates expected to apply for the period when the asset is realised or the liability is settled, based on tax rate and tax law that have been enacted or substantially enacted by the end of reporting period. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects to recover or settle its assets and liabilities.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Deferred tax is recognised in profit or loss, except when it relates to items recognised outside profit or loss, in which case the tax is also recognised either in other comprehensive income or directly in equity, or where it arises from the initial accounting for a business combination. Deferred tax arising from a business combination, is taken into account in calculating goodwill on acquisition.

 

Sales tax

 

Revenue, expenses and assets are recognised net of the amount of sales tax except:

 

·     when the sales taxation that is incurred on purchase of assets or services is not recoverable from the taxation authorities, in which case the sales tax is recognised as part of cost of acquisition of the asset or as part of the expense item as applicable; and

 

·     receivables and payables that are stated with the amount of sales tax included.

 

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

 

Foreign currency transactions and translation

 

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency ("foreign currencies") are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each financial period, monetary items denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in United States dollar using exchange rates prevailing at the end of the reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, are recognised initially in other comprehensive income and accumulated in the Group's foreign exchange reserve.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign exchange reserve.

 

On disposal of a foreign operation, the accumulated foreign exchange reserve relating to that operation is reclassified to profit or loss.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

 

Plant and equipment

 

All items of plant and equipment are initially recognised at cost. The cost includes its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Dismantlement, removal or restoration costs are included as part of the cost if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the plant and equipment.

 

Subsequent expenditure on an item of plant and equipment is added to the carrying amount of the item if it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. All other costs of servicing are recognised in profit or loss when incurred.

 

Plant and equipment are subsequently stated at cost less accumulated depreciation and any accumulated impairment losses.

 

Depreciation is calculated using the straight line method to allocate the depreciable amounts over their estimated useful lives on the following basis:

 

Computers and books	3 - 5 years
Furniture and fittings	3 - 7 years
Motor vehicles	5 years
Leasehold improvements	3 - 5 years

No depreciation is charged on construction-in-progress as they are not yet ready for their intended use as at the end of the reporting period.

 

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

 

The estimated useful lives, residual values and depreciation methods are reviewed, and adjusted as appropriate, at the end of each financial period.

 

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

 

The gain or loss arising on disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

 

Intangible assets

 

Goodwill

 

Goodwill arising on the acquisition of a subsidiary or business represents the excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition date fair value of any previously held equity interest in the acquiree over the acquisition date fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition.

 

Goodwill on subsidiary is recognised separately as intangible assets. Goodwill is initially recognised at cost and subsequently measured at cost less any accumulated impairment losses.

 

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

 

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.

 

Intangible assets acquired in a business combination

 

Intangible assets acquired in a business combination are identified and recognised separately from goodwill if the assets and their fair values can be measured reliably. The cost of such intangible assets is their fair value as at the acquisition date.

 

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets acquired separately.

 

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial period-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite useful lives is recognised in profit or loss.

 

An item of intangible asset is derecognised upon disposal or when no future economic benefits are expected from its use of disposal. Any gain or loss on derecognition of the asset is included in profit or loss in the financial period the asset is derecognised.

 

Area development and centre fees

 

An area development fee is paid for the exclusive rights to develop and operate the "Wall Street English" language centres in Myanmar while the centre fee is required to be paid in respect for the opening of a new "Wall Street English" language centre in Myanmar and Vietnam. The area development and centre fees are capitalised and amortised over the period of 10 years from the date operation commences and when the new centre commences operations respectively.

 

Set-up fee and brand licensing fee

 

Set-up fee is paid for the exclusive rights to develop and operate the "Auston" college in Myanmar. Brand licensing fee is paid for the exclusive, irrecoverable, non-transferrable rights of use of the licensed intellectual property and trademark for the operations of the Auston college. The set-up and brand licensing fees are capitalised and amortised over the period of 10 years from the date operation commences.

 

Computer software licence

 

Acquired computer software licence is initially capitalised at cost which includes the purchase price (net of any discounts and rebates) and other directly attributable costs of preparing the software for its intended use. Direct expenditure which enhances or extends the performance of computer software beyond its specifications and which can be reliably measured is added to the original cost of the software. Costs associated with maintaining computer software are recognised as an expense as incurred.

 

Computer software licence is subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives of 3 years.

 

Customer-related assets 

 

Customer-related assets comprise customer contracts and customer relationship arising from business combinations and are initially measured at fair value as at the date of acquisition. These assets are capitalised at fair value as at acquisition date and subsequently measured at cost less any accumulated amortisation and any accumulated losses.

 

Amortisation is recognised in profit or loss on a straight-line basis over their estimated useful lives of 3 years.

 

Impairment of non-financial assets excluding goodwill

 

At the end of each financial period, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

 

The recoverable amount of an asset or cash-generating unit ("CGU") is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

 

Financial instruments

The Group recognises a financial asset or a financial liability in its statement of financial position when, and only when, the Group becomes party to the contractual provisions of the instrument.

 

Financial assets 

 

The Group classifies its financial assets into one of the categories below, depending on the Group's business model for managing the financial assets as well as the contractual terms of the cash flows of the financial asset. The Group shall reclassify its affected financial assets when and only when the Group changes its business model for managing these financial assets. The Group's accounting policy for each category is as follows:

 

Amortised cost

These assets arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method less provision for impairment. Interest income from these financial assets is included in interest income using the effective interest rate method.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process, the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

 

Impairment provisions for other financial assets are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether at each reporting date, there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

The Group's financial assets measured at amortised cost comprise trade and other receivables (excluding prepayment and advances for hostel operations), loan receivables and cash and cash equivalents in the consolidated statement of financial position.

 

Equity instruments at fair value through other comprehensive income ("FVOCI")

 

The Group has strategic investments in the equity securities of listed and unlisted entities which are not accounted for as a subsidiary, associate or jointly controlled entity. For those equity instruments, the Group has made an irrevocable election to classify the investment at fair value through other comprehensive income rather than through profit or loss as the Group considers this measurement to be the most representative of the business model for these assets. They are carried at fair value with changes in fair value recognised in other comprehensive income and accumulated in the fair value through other comprehensive income reserve. Upon disposal, any balance within fair value through other comprehensive income reserve is reclassified directly to retained earnings and is not reclassified to profit or loss.

 

Dividends are recognised in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment, in which case the full or partial amount of the dividend is recorded against the associated investment carrying amount.

 

Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in the fair value through other comprehensive income reserve.

 

Derecognition of financial assets

 

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

 

Financial liabilities and equity instruments

 

Classification as debt or equity

 

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

 

Equity instruments

 

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. The Company classifies ordinary shares as equity instruments.

 

Financial liabilities

 

The Group classifies all financial liabilities as subsequently measured at amortised cost.

Trade and other payables

Trade and other payables, excluding advances received, are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, where applicable, using the effective interest method.

 

Loans from former immediate holding company

Interest-bearing loans from former immediate holding company is initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost, using the effective interest method.

 

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The differences between the carrying amount and the consideration paid is recognised in profit or loss.

Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise of cash on hand, cash at bank and demand deposits which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

 

Leases

 

As lessee

 

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

 

·      leases of low value assets; and

·      leases with a duration of twelve months or less.

 

The payments for leases of low value assets and short-term leases are recognised as an expense on a straight-line basis over the lease term.

 

Initial measurement

 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the Group's incremental borrowing rate on commencement of the lease is used.

 

Variable lease payments are only included in the measurement of the lease liability if it is depending on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

 

On initial recognition, the carrying amount of lease liabilities also includes:

 

·      amounts expected to be payable under any residual value guarantee;

·      the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; and

·      any penalties payables for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

 

Right-of-use assets are initially measured at the amount of lease liabilities, reduced by any lease incentives received and increased for:

 

·      lease payments made at or before commencement of the lease;

·      initial direct costs incurred; and

·      the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.

 

The Group presents the right-of-use assets (excluding those which meet the definition of investment property) and lease liabilities separately from other assets and other liabilities in the consolidated statement of financial position.

 

Subsequent measurement

 

Right-of-use assets are subsequently measured at cost less any accumulated amortisation, any accumulated impairment loss and, if applicable, adjusted for any remeasurement of the lease liabilities. The right-of-use assets under cost model are amortised on a straight-line basis over the shorter of either the remaining lease term or the remaining useful life of the right-of-use assets using the straight-line method, on the following bases:

 

	Years
International school building	10
Office premises and language centres	1 - 8
Motor vehicles	2.5 - 3

 

If the lease transfers ownership of the underlying asset by the end of the lease term or if the cost of the right-of-use asset reflects that the Group will exercise the purchase option, the right-of-use assets are depreciated over the useful life of the underlying asset.

 

The carrying amount of right-of-use assets are reviewed for impairment when events or changes in circumstances indicate that the right-of-use asset may be impaired. The accounting policy on impairment is as described in the financial statements.

 

Subsequent to initial measurement, lease liabilities are adjusted to reflect interest charged at a constant periodic rate over the remaining lease liabilities, lease payment made and if applicable, account for any remeasurement due to reassessment or lease modifications.

 

After the commencement date, interest on the lease liabilities and variable lease payments not included in the measurement of the lease liabilities are recognised in profit or loss, unless the costs are eligible for capitalisation in accordance with other applicable standards.

 

When the Group revises its estimate of any lease term (i.e. probability of extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments over the revised term. The carrying amount of lease liabilities is similarly revised when the variable element of the future lease payment dependent on a rate or index is revised. In both cases, an equivalent adjustment is made to the carrying amount of the right-of-use assets. If the carrying amount of the right-of-use assets is reduced to zero and there is a further reduction in the measurement of lease liabilities, the remaining amount of the remeasurement is recognised directly in profit or loss.

 

When the Group renegotiates the contractual terms of a lease with the lessor, the accounting treatment depends on the nature of the modification:

 

·      If the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional right-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy;

 

·      In all other cases where the renegotiation increases the scope of the lease (i.e. extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount;

 

·      If the renegotiation results in a decrease in scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference being recognised in profit or loss.  The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount.

 

For lease contracts that convey a right to use an identified asset and require services to be provided by the lessor, the Group has elected to account for the entire contract as a lease. The Group does not allocate any amount of contractual payments to, and account separately for, any services provided by the lessor as part of the contract.

 

Accounting policy prior to 1 April 2019

 

As lessee

 

Operating leases

 

Rentals payable under operating leases (net of any incentives received from lessors) are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

 

Provisions

 

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the financial period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

 

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. The increase in the provision due to the passage of time is recognised in the statement of comprehensive income as finance expense.

 

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.

 

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Chief Executive Officer who makes strategic decisions.

Loss per share

The calculation of the basic and diluted loss per share attributable to the ordinary equity holders of the Company is based on the following data:

 

	30 September 2020	31 March 2019
Numerator
Loss for the financial period/year attributable to the
owners of the parent (US$)	(8,683,164)	(2,534,646)
Denominator
Weighted average number of ordinary shares for the
purposes of basic and diluted loss per share	2,554,397	2,453,229
Loss per share (US$)
Basic and diluted	(3.40)	(1.03)

In the current financial period and previous financial year, diluted loss per share is the same as the basic loss per share because the dilutive potential ordinary shares to be exercised are anti-dilutive as the effect of the shares conversion would be to decrease the loss per share.

Subsequent events

 

a)     Renegotiation of commercial terms with a related party

 

As a result of the Covid-19 outbreak and the worsening of the overall trading conditions in the education sector, the Group is also in the process of reviewing the key terms of its operating and management agreement with its related party, TED Limited.

 

The outcome of the renegotiation may include changes to the existing Operating and Management and Technical Support Services agreements which could result in E Partners Limited to own, operate and manage the Wall Street English language learning centers in Myanmar. Thereafter, TED Limited will sub-lease the language center premises and provide management services to the Group.

 

As at reporting date, loss allowances were made for certain trade and other receivables due from related party, TED Limited.

 

b)    Myanmar's State of Emergency Impact

 

On 1 February 2021, the Myanmar military announced, via the military-owned news channel Myawaddy News, that it had declared a state of emergency for a period of up to one year.

 

The announcement stated that the Commander-in-Chief of the Defence Services, Min Aung Hlaing, shall be in power for the duration of the state of emergency, while Vice President U Myint Shwe shall serve temporarily as President. It was reported in the Myanmar Times that, earlier in the day, State Counsellor Daw Aung San Suu Kyi, President U Win Myint and other National League for Democracy ("NLD") officials across the country were detained by the military, ahead of the first parliamentary sessions, scheduled to take place later in the day.

 

From a business perspective, the Group's American International School and language centers continue to deliver their education services online and offline while its security services business segment remains integral to secure embassies, NGOs and national infrastructure. The Group's Ostello Bello boutique hostels remain closed, pursuant to the active Covid-19 restrictions in Myanmar.

 

As part of the Group's geographical and economic risk management, the Group has mitigated these risks by diversifying through the acquisition of Wall Street English Limited Liability Company, a company incorporate in Vietnam in the business of provision of education services under the franchise of Wall Street English which will contribute significantly to the Group's estimated revenues for financial year ending 30 September 2021. 

 

As Myanmar's state of emergency remains in place as at the date of issuance of these financial statements, the Group cannot reasonably ascertain the full extent of the probable impact of the State of Emergency disruptions on its operating and financial performance for the financial year ending 30 September 2021. The diversification of the Group's operations between Myanmar and Vietnam should help mitigate the overall Covid-19 and geographical risk exposure to the Group.